Two per cent is no solution, secret report

Indian Affairs Minister Jim Prentice received a report on Groundhog Day that describes a very serious financial situation within his department, but he and his government apparently decided not to notice the black shadow on the horizon.

National Chief Phil Fontaine said the shadow is getting harder and harder to ignore.

The minister was told about the precarious financial situation at Indian and Northern Affairs Canada (INAC) six weeks before Finance Minister Jim Flaherty read his March 19 budget speech. First Nation observers are wondering why so little was done about those urgent warnings.

The 33-page report, entitled “Is two per cent enough? INAC funding for First Nations basic services,” is labeled “Secret—Advice to minister.” The first sentence, under the heading “Issue,” sets the tone, saying that “policy and program pressures are beyond the capacity of the substantial $6 billion departmental budget.” A spending freeze imposed during the deficit cutting days of the Chretien Liberals placed a two per cent a year cap on growth for INAC’s budget in 1996. It’s still in place, even as inflation and rising population numbers have strained budgets.

The document’s author seeks to inform the minister that after 10 years of INAC managers robbing Peter to pay Paul as they attempt to provide basic services, the department is now at the breaking point, and many basic services have been cannibalized to address other, more pressing matters that could lead to political embarrassment for the government.

While the 10-year-old cap is set at two per cent, the report said spending that couldn’t be avoided has meant that costs are actually rising at a slightly higher rate.
Specific targeted increases for such “gap filling” programs as special education have added an average of 0.9 per cent annually for an average total annual increase of 2.9 per cent. This growth lags the combined population and price increases of four per cent, resulting in an annual shortfall of 1.1 per cent.

Since the 1996 program review decision, “there has been a six per cent decrease in constant dollar per capita on reserve expenditures.” In another three-page document, obtained by a federal opposition party, the figure attached to the funding increase for this fiscal year is 0.6 per cent, well below even the two per cent figure.

Weeks before the budget, the author of the report told the minister that millions would be needed to get back to even and that the government must consider health and safety concerns if the problem is not addressed.

That set off alarm bells with Ottawa insiders.

“In what other population in the country could you have a department of professionals warning about health and safety risks and then have it ignored,” said one, on the condition of anonymity.

There’s another genuine bombshell in the 33-page report.

“To some extent, the funding outlined by the First Ministers’ Meeting would address the shortfall,” it states. “Additional funding of about $50 million per year plus an A-base adjustment of up to $500 million would be required to match First Nations population and price growth of the last decade.” A-base funding is a department’s permanent core of funding to which special short-term program costs are added each year.
The $5.1 billion plan approved in Kelowna and abandoned by the Conservative government, in other words, wouldn’t have done much more than bring INAC financing up to par.

The bureaucrat’s comments also revealed that funding for First Nation administrative positions is stuck in the distant past.

“The department and First Nations have coped with the shortfall primarily through reallocating from the infrastructure program and through limiting growth in various program areas (e.g. First Nations staff salaries and benefits),” the author wrote, later adding that “tribal council and band advisory positions are still funded at $50,000 a year (since 1986). INAC funds employees’ benefits at 12.5 per cent versus federal at 20 per cent.” And it appears that “Indians” are of secondary importance in the department of Indian and Northern Affairs.

“Significant economic growth in the north, fueled by resource development and oil and gas exploration and development, has outstripped the Northern Affairs Organization’s ability to provide effective support to economic development activity in the territories.
Pressures on operations have resulted in reallocation of more than $40 million annually from Indian and Inuit programming, which is not sustainable,” the report stated. “Over the last five years, the department has been required to reallocate funding to cover new government priorities (e.g. clean up of northern contaminated sites). There is little remaining flexibility to reallocate without major policy and program decisions about redesign.”

The department resorted to “Treasury Board contingency votes or Governor General’s warrants” to cover this year’s funding requirements. Ottawa sources say those two devices are emergency measures for line departments to get money outside of their budgets.

Government funding for non-Native people in the territories is almost twice that of First Nations
“On-reserve per capita expenditures are less than territorial per capita expenditures despite similar demographics, scale of operations and geographical challenges. The 6.8 per cent annual growth in federal transfers to territories (96/97 to 04/05) compares to 2.9 per cent growth in basic services funding for First Nations. On reserve expenditures exclude claims and litigation,” the minister was told.

With all the attention on water quality problems on reserve, it’s interesting to note that $293 million was reallocated from INAC’s “capital” budget to other areas.
While capped at two per cent, costs for elementary and secondary education for First Nation students have been rising by 4.4 per cent a year, the report states. Close to $100 million has been reallocated to address that shortfall. The report notes that the higher cost “reflects ‘price-taker’ nature of provincial school expenditures.”

First Nation technicians say that is an alarming comment that means that the government will pay provincial (non-Native) education systems when they raise their prices, but not First Nations. And the money to pay the provincial school systems is cannibalized from basic services budgets.

Assembly of First Nation sources are calling the situation described in this report “fiscal discrimination.”

“It confirms everything that we’ve been saying for the last while,” Fontaine said during a phone interview on April 13. “Our communities and our governments are seriously under-funded and the unfair expectations placed on our governments are really discriminatory and completely unfair because we’re being forced to do more with less. As a result, we’ve seriously compromised the health and safety of the people we are expected to serve.

“Departmental officials have now made the same arguments that we’ve been making and it’s pretty scary.” The fact that the government chose not to act on the warnings in the report is very troublesome to the national chief.

“It isn’t AFN. It isn’t the national chief. It isn’t regional chiefs that are making these arguments. It’s coming from within the government. These people obviously don’t have an axe to grind. They’re doing their jobs and they want to provide the best advice to the minister,” he said.
“Now we discover, and I didn’t know this until I read this document, that the minister was well informed. He was advised that this was a serious situation and we were dealing with a situation of crisis proportion. The end result of all this is that on March 19 we were essentially ignored. That’s further compromising the health and safety of our people."

Fontaine hinted that the federal position on spending for First Nations is part of a behind-the-scenes political fight. He said the minister’s public comments are designed to play to a certain political constituency.

“For example, the argument that the government is spending an awful lot of money and there needs to be value for the dollars spent. We see that as code language and I’ve raised that with Minister Prentice and I’ve asked him to refrain from making that kind of assertion because it’s discriminatory,” he said. “They don’t say that about provincial governments and the billions that are being transferred to provinces nor to the $17 billion that was committed to defense.” Apparently, the government will not raise funding until the chiefs agree to structural changes in the way First Nations governments account for their spending.

“We’re not opposed to structural changes. We know that we have to do some things differently and better. But we can’t afford to compromise the health and safety of our people,” the national chief said.

Fontaine said the Conservative position and the minister’s public comments play to the segment of the Canadian population that is biased against First Nations.

“Of course. [Indian Affairs Minister Prentice’s communications officer] Deirdre McCracken keeps saying we can’t afford to keep pouring money down the funnel. As if money is being poured down the funnel. That isn’t so. What the facts tell us here is that our communities are seriously under-funded and there isn’t such a thing as pouring money down the funnel and not getting value for dollars,” Phil Fontaine said.

By taking money away from First Nation and Inuit programming to pay for the mainstream economic boom in the north, it almost seems the Conservative government is attacking Aboriginal people, he added.

“And I don’t know why this is so. It seems that we’re being punished and I don’t know why. I don’t know what we did wrong,” he said. “We’ve made some very serious overtures to the Harper government to establish a respectful relationship where we can actually do good things for First Nations people. And we’ve done so over the last couple of months. And I can’t claim success. And I’m very disappointed.”

Bill Rodgers, the Indian Affairs minister’s director of communica-tions, dismissed the leaked documents as out of date.

“The documents that have been circulated to the Winnipeg Free Press and other publications in recent weeks are old and pre-date the new govern-ment’s first budget. Unlike the previous government, Minister Prentice has taken a targetted approach to First Nations funding, setting priorities in areas that include water, housing, education, economic development and the acceleration of the land claims process. Improvements in these areas will go a long way to improving the overall quality of life of First Nations residents,” he said.